Hard Times in the City of Sin

LAS VEGAS, Nov. 2, 2009

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With its new foray into luxury tourism, Las Vegas has moved miles away from its first few successful decades. Those were the wild years. Since banks and corporations didn't want to be associated with gambling, only the Mafia was willing to invest in casino development. Those were the years when criminals like Bugsy Siegel, Meyer Lansky and Anthony Spilotro openly controlled the city and when crooners like Frank Sinatra and Dean Martin performed in relatively shabby venues, such as the Desert Inn.

It wasn't until the 1980s, when Wall Street discovered the gambling oasis in the Mojave Desert, that the casinos and hotels became not only flashier, but also more sophisticated. "The entire amount of new supply is all high-end, luxury rooms," says Moriarty.

For Alan Feldman, the head of communications at MGM Mirage, there is only one option: "We have to expand the market." Feldman wants to attract people from new target groups, including the "cosmopolitans" and "urban elites" -- in other words, those for whom Las Vegas has always been, as Feldmen says, "too kitschy" or "unreal". If only a small percentage of Americans can be convinced to come to Las Vegas, as Feldman hopes they will be, even the new hotel rooms will soon be full.

At the same time, the city's tourism officials have stepped up their efforts to attract visitors from abroad, who have traditionally only accounted for about 15 percent of guests. For example, tourists from Germany have almost no effect on the city's total number of visitors. The few that do come to Las Vegas are usually on their way to the nearby Grand Canyon.

Deutsche Bank to the Rescue?

Things look much different in the city's financial world. Deutsche Bank has "massive exposure" in Las Vegas, to the tune of a figure of double-digit billions, says Moriarty, who launched his own business with a partner this spring after having managed Deutsche Bank's investment banking arm in Las Vegas for years.

Since the end of 2008, Deutsche Bank has even been in direct control of one of the city's largest construction projects. At the time, the developer of the Cosmopolitan Resort & Casino could no longer service a $760 million loan, so Deutsche Bank acquired the 3,000-room behemoth for $1 billion.

"They are even picking out the wallpaper," themselves, says one insider. The banks are doing everything not to lose their investments.

Even so, the bankers will still not be able to operate the casino themselves. Instead, they will have to hire a professional with a license to run a gaming operation. The resort is scheduled to open in 2010. Deutsche Bank already took a €500-million ($741 million) write-off on the property in the second quarter of 2009.

Financing Competitors

Likewise, as a result of its other lending projects in the city, the bank actually has a hand in financing its competitors. For example, the owners of the Fontainebleau Hotel Corporation were convinced that the Germans wanted to "destroy" their Las Vegas development project. Construction was halted in the summer on the 3,800-room complex, which was 75 percent complete, after an $800 million loan, of which Deutsche Bank held a significant portion, was withdrawn.